LONDON, June 4 (Reuters) – Where’s the metal? Global manufacturing activity is experiencing the most severe contraction since the Financial Crisis of 2008-2009 but signs of surplus metal are conspicuous by their absence.
Total stocks registered with the London Metal Exchange (LME) ended May at 2.2 million tonnes, up just 260,000 tonnes on the start of 2020.
Aluminium stocks increased by a net 23,000 tonnes over the first five months of the year, a counterintuitive outcome given the size of the market – 65 million tonnes per year – and the total implosion of demand from the automotive and aerospace sectors. But in metals storage, appearances are always deceptive. Surplus stocks are accumulating in the statistical shadows and more is on its way.
Unfortunately, there is no way of seeing this metal since the LME only counts what is on warrant. That is about to change. The exchange has for several months been collating statistics on what it calls its shadow warehousing network with the aim of boosting transparency.
For now, though, trust the LME warehousing companies themselves. They have been lifting capacity to handle the looming glut of surplus metal.